Any help on how to approach this question would be appreciated:

1. You have a utility function given by U (C) = 15/? where C is equal to your wealth [in thousands of dollars) less any medical expenses. In a typical year you earn $160,000, but there is a 10 percent chance that you will get sick and incur $70,000 worth of medical expenses (but will lose no wages). Answer the following questions, showing all work. a. Explain what it means to buy full insurance in this case. b. How much would you be charged for actuarially fairly priced insurance? Explain why. c. Over the course of the year, the insurer makes negative prots. It turns out you are lower risk than the rest of the pool; the probability of getting sick in the insurer's whole pool is 1 1 percent, even though your probability of getting sick is truly only 10 percent. The insurer raises the price of insurance to $7,700 to reect this. Would you still by the insurance at the new price? Show your work and explain. d. What is your risk premium? Show your work and explain. d. Provide an interpretation of the risk premium in this particular example. e. What is the maximum amount that you willing to pay to fully insured (Le. get a payoff of $70,000 when you get ill)